morning. we were down 93 on the low of the day, and then suddenly a comeback. we were down 13 on that comeback, and now we're heading lower again. why the comeback? hewlett-packard which will be reporting earnings shortly. big comeback here. the markets looking for 71-cent profit on revenue of $27.71 billion. see if they can meet the expect as youed. as for the other big numbers coming out, aig is looking for a profit of eight cents on revenue of $8.7 billion, and it's tracking the market. positive very briefly. now it's heading lower and bob bon moesh will be maria's guest and veteran trader harry dolan is here. what do you make of this schizoid market? >> we saw a spike in volume yesterday and a follow-through on the volume this morning which was significant. >> you think that the trend is to the downside? >> what we're doing is teaguing a pause. the over all trend is still

positive. saw a real strong rally from the bottoms of 12,8 to above 14,000 and trace to around 113,6, 13,550 you put your feet back in the water again. >> you'd be buying the dips? >> i'd be buying the dips, cautiously and looking for the news items and looking cautiously at that well. the market is looking for another shoe to drop. >> which shoe are you looking at most carefully, the fed news or the mumtales from hewlett-packard coming out? >> fundamentals are having more of an impact than expected. looking at walmart earnings, the market looked at those with a little bit of discouragement. those are the issues in front of us. where are earnings going forward into the next few quarters? >> thanks, harry. as always, the market, a crazy day. earnings coming up from hewlett-packard. david faber will have that and bob benmosche talking about his numbers from aig. second hour of the "closing bell" right now. i'll seal you tomorrow. >> have a good one.

and it is 4:00 on wall street. do you know where your money is? hi, everybody, welcome back to the "closing bell." i'm maria bartiromo on the into of the new york stock exchange. man, a roller coaster ride today on wall street as the major averages close lower for a second day in a row, off of the worst levels of the day. market had been down close to 100 points. we're finishing down 49 points on the dow jones industrial average after hitting the lows about half an hour ago when the market was down 13 point. nasdaq giving up 33 points tonight. technology one of the leadership groups on the downside and the s&p 500 weaker by 9.75. moments away from aig and h-p earnings. david faber is live tonight at h-p headquarters, and aig ceo bob benmosche with me live exclusively. in the meantiming right to the market's action as we await earnings news that will set the tone for tomorrow. joining me now is nathan backram

and ed batowski. ed, worries over the sequestration, worries over a global slowdown. waiting on earnings. how closely should we be focused on the earnings picture as we sit here and wait for h-p and asnig. >> that's what moves stocks prices. stocks are still on a projected basis based on the earnings expectations, are still cheap. stocks are 15% undervalued based on where interest rates are right now, maria. the stocks should be 10% overvalue. should we focus on earnings? we should always focus on earnings. that's what it's all about. how would you characterize the earnings period so far? >> i will tell you. i think it's come in pretty mild at this point. where do you think the market is going to go. if we break below and can't forget that we're looking at a technical analysis, break below 13,6, that's really the support level on the stock market right now. >> we seem to have a blowout here on our hands. aig just reporting numbers. 20 cents a share. the expectation has called for a

loss of eight cents a share in the fourth quarter and the revenue is expected at $8.7 billion for the quarter. it looks like what we're looking at here, certainly on the bottom line which is the earnings growth, of 20 cents versus a loss, would be a positive. we're waiting on the revenue, and the stock is trading wildly as these numbers are just hitting the tape as we talk. >> there's got to be some accounting stuff there. >> we'll get to the bottom of it when bob benmosche joins me. nathan, let me turn to you on earnings in the backdrop for this market. would you commit new capital to stocks right here? >> would i wait until we all get really scared which we're not yet, maria. haven't gotten enough fear about the fed pulling the plug yet. what we saw the last two days is all of a sudden people said, gee, the fed can leave us standing here at altar. oh, my goodness, what shall i do so the market went down a little. when we realize the fed is not going anywhere by a long shot, then the market will recover.

if we continue to be drive-by by our fears, and there's many of them out there on main treatment versus the earnings still good on wall street, if we see a dip, would i certainly reposition into that dip, and i hate to say, it i agree with ed that stocks are cheap, but the perception is that we've gone as far as we're going to go until we can get some new guidance. >> you're basically saying this market has gotten ahead of itself. are you saying we'll have an opportunity to buy stocks at lower levels? >> you betcha. absolutely. as long as there's any questions at all about central bankers, and in this case our central banker and what bernanke is going to do, i think you'll see the market wobble. you'll get some producer price information that says prices could go up. you get hit at the pump and hit with your 2% social security. by the way, we should tell all of america stop overwithholding to the government. you won't worry about the tax refund and that will help in the short-term but that's a real practical situation that every owner of a business should tell their employees. until that happens, we have a chance for a pullback.

>> nathan, you and i have been doing this a long time and i don't remember any time in the 26 years that i've been in business where there's more discussions about what washington is going to do to affect the stock market. >> right. >> than we have right now. i think it's really remarkable that we talk about what is the fed going to do, instead of what are the corporations going to do. >> absolutely. >> really the discussion we should be having. >> don't want to have a certified financial planner anymore. sun with a doctorate in political science, maybe michael bechsloss should be your advi r adviser. >> david faber is live right now at h-p headquarters in palo alto. david, over to you. >> reporter: thanks very much, maria. a company not out of the woods but certainly a good deal of improve meant over the last quarter, hewlett-packard reporting non-gap earnings of 82 cents a share, above expectat n

expectations. the revenue number also above those expectations coming in at 28.4 billion, again above. it was a quarter, as i said, that still saw revenue decloins in all of the major businesses at the company, something that ceo meg whitman said is going to be the case 2013, a transition year for the company that's in the midst of a multi-year turnaround? that being said certainly investors can grab ahold of a few signs of real progress? one key unit, printing looks like they did better than had been anticipated. the only significant sector that saw an increase in operating margin, up 3.9 points, that is year over year for that group. that helped. they are selling better at the higher end. they are taking share in printing. of course, that includes the ink business as we say. the enterprise group also actually having a decent quarter, again are versus what analysts were looking for. with margins there coming in at

15.5%. that is the enterprise group itself. they did have margin reduction, but nonetheless, less than had been anticipated. ceo meg whitman feeling pretty good where they are. enterprise services an area that had been expected to have negative margins and did post a bit of a positive margin. that however, may go back in the second half of the year. they were expecting some runoffs of contracts in the first quarter that didn't happen as quickly as anticipated. that may be one reason why the company is sticking with its overall guidance for $3.40 to $3.63 a share in earnings and, by the way, pointing to an earnings beat higher than anticipated for next quarter. now looking for a range of 80 to 82 cents a share for the next quarter. one area though that continues to bedevil the company, as many of our viewers already know, the personal systems group, that includes, of course, the sale of

pcs. when you talk about consumers in this country and around the world and their willingness or interest in buying pcs, well, it's dropping and deteriorating rather rapidly, down 13% year over year. you know, we think of hp as a pc company, the fact is only $223 million in operating profit was produced by this $8.2 billion revenue number from pcs, and that is only 10% of overall operating income at the company, a 2.7% margin. there was pricing pressure. they continue to potentially take share, but it's very brutal out there when it comes to pricing and demand for pcs and notebooks. nonetheless, ceo meg whitman continues to maintain that it's not just about those units particularly or those particular items. it's about particular systems overall, integration, convergence and security, so there's going to be a continued narrative that says, hey, keeping these things is very important. they continue to cut costs. operating expenses down 1.4%.

overall at the company, and we do get a decent sense from hewlett-packard, given its global nature of the rest of the world, europe, still very slow, but china a bit of a rebound, and, maria, the u.s. doing okay. again, hewlett-packard better than anticipated. >> all right, david, thank you. stay right there. we're going to bring in david garrity and roger kay of end point technologies associates. good to see everybody. thanks for joining us. want to point out aig numbers are also out, and i want to tell our viewers that there is stock to buy in aig after the close tonight. just spoke with the market-maker there, so we're watching that story as well as this story. hewlett-packard though is the focus right now. david garrity, what's your take on the quarter? >> the earnings multiple for the company, single digits, a five handle. i mean, here's a company. it's great and wonderful that they are doing better in terms of businesses that are losing share in the overall computing market, and it's thighs to see that they are getting some positive margin surprises, but the fact of the matter is

hewlett-packard was initially thought to be an innovator and what we see out of corner, fine, we can rearrange the deck chairs on the "titanic" but are we putting them on a course that takes them away from the iceberg, but we haven't seen that yet? >> roger, do you agree with that? >> i'm slightly more positive. i think meg bought herself some more time here, this quarter and next. the street will give her more breathing room. that's good. the dependence on pcs is still problematic, but i like the fact that they have a big enterprise portfolio and that they are networking and server business is doing all right. i really think that they are going through essentially the same thing that dell is dealing, but they are further along. they have a much better established enterprise business, and this is the direction they are going in. the question she has to answer is what she has to do in high mobility which is to say in smartphones and tablets because that story has yet to unfold. >> all right. so, david, how do you see that

unfolding? longer term i know you've talked to meg whitman about the long-term vision of the company. does that jive with what we're hearing today? >> well, i think in terms of smartphones and tablets, it's certainly a market they would love to be in and something they would have to be in as far as their systems group is concerned. one apparent solution becoming more emergent is hack yard probably should do a deal with google wherein google can take the tablet and smartphone business that they have, which was primarily motorola mobility, and roll it into a hardware joint venture with hewlett-packard who could in turn say to google, look, we'll adopt chrome and android as our operating system and we'll use poverty google applications for spreadsheets and word pros sesing and other functionality. certainly we look at the landscape with respect to dell and microsoft. microsoft giving $2 billion to dell to help affect the management buyout. i mean, there is certainly a situation here where there can be much closer relationships between software vendors and hardware manufacturers. i think that the matchup between

hulee -- hewlett could be put bk in its position traditionally in the technology field. >> david faber? >> you know, maria, it's interesting. i haven't heard anything like that from any of the executives i've had an opportunity to speak to here at hewlett-packard. there's certainly a focus on mobility. there's going to be an emphasis on innovation. i would expect in the conference call and the like and some of the comments we'll get from ceo meg whitman in terms of even hp labs and hair focus and, of course, mobility strategy. there may continue to be pressure amongst investors to say what is the pc business and why is it better aligned with the overall company, but my expectation is she will fight back quite strongly in saying, hey, nobody really understands computing the way hp does, and the fact is as these eco-systems get more and more complex, you're going to actually need us to bring all the pieces

together, not to mention security becoming such an important issue, so we'll watch that. one other point i did want to make. the company did produce a lot of free cash flow. 2.1 billion operating-. 2.6 billion, and so who were concerned about a financial crunch in this company, does not seem to be well warrant the. debt came down to $7.4 billion. not typically a huge free cash flow producing quarter for the company so that number is a pretty good one. >> bottom line, david garrity, do you want to sell hewlett at this price given your concerns in. >> i think it could be a very nice turnaround story, but we've got to see the strategic concerns. whitman was on the board when they bought palm and wrote it off. the company had a chance to develop a mobility strategy. they can't build it from ground zero. they have to partner with somebody. i think google is the best bet. >> you were on the other side of that trade, roger kay. you want to buy at this price or not? >> i think they are beaten down

pretty good so maybe there's light at the end of the tunnel. i feel pretty good about it. >> catch an exclusive interview with hp show meg whitman tomorrow morning at 9:00 a.m. eastern on "squawk box." coming up, the man behind the aig numbers. the impact of sandy on the insurance company's bottom line and how about this for a deal breaker? the french are lazy. one ceo's opinion. he and the french government are exchanging blows now. he's coming up to tell us why he said au revoir to france. that's coming up in a minute. no two people have the same financial goals. pnc works with you to understand yours and help plan for your retirement.

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welcome back. aig just out with earnings. let's get to mary thompson with all the details. >> the company's operating income, 20 cents a share well above analyst expectations. they were looking for a loss of eight cents a share. the company's net premiums earned in its core property and casualty business, $8.6 billion. pretty much in line with expectations. the company's ceo saying the firm managed the profit once you take out charges linked to hurricane sandy despite the largest catastrophe in the u.s. one thing i do want to note is

premiums in both the life insurance as well as the property and casualty insurance did decrease from the last quarter. aig beating the street. i know you'll have more with bob benmosche. >> thanks very much. let's get the story behind the numbers. joining me right now is a cnbc, conclusive is aig president and ceo bob benmosche. thanks so much for joining us. let's talk about the quarter and what drove it, the impact of hurricane sandy. what can you tell us about the most recent three months before we go broad and where this company goes next. >> looking at last three months, handy is clearly a big hit in the quarter, but it's really representative of the size of this company and the kinds of risks that we take on and why people depend on aig. as i said before, with 97% of the fortune 1,000 as customers, you think about what was along the rivers here in manhattan. clearly they were impacted, and it was a cost to us. if you look at underlying results what you've seen is

gradual improvement which we said would occur. the top line is holding steady and the casualty line which has caused us issues in the reserve is coming down, and we're making up with better margin product that we have at the company, and you're seeing that our risk management and data management begin to think about being more data mining in terms of how we focus on things. our loss ratios for eight quarters now are slowly coming down so the day-to-day results are terrific, and we had a couple of headline problems which caused a quarter, but, still, with the huge loss of sandy $2 billion pre-tax still made a profit in the quarter. >> that's a big number and still able to make a profit. where does the growth come from in the coming year? what do you bet on in terms of driving this business? >> we'll continue to do what we do and do well. on the property and casualty side and commercial insurance, we do a tremendous job, marine,

aviation and so on and continuing to do our casualty business, being more selective, and of course our property we continue to do on the commercial side, continuing on consumer around the world, a big consumer business in japan. you saw a deal with picc in japan. we'll do growth there on the consumer side. the u.s. life and retirement business that we're working to become more global, so all of these businesses are just continuing to do well, continue to do what we do. even life and retirement. people in this country are re realizing more and more and more the enormous responsibility to take care of their retirement with their own savings. >> a lot of analysts are looking at the quarter and comparing it to previous quarters and comparing it to noise. you had the treasury sale, the sale of the remaining common stock and the impending sale of aig's disposition of the remaining aia stake, all secondary issues that sort of words complicated the story,

putting the company in focus for the next couple of quarters. are these things now behind, or how can you characterize what happened in terms of these other issues that were really front page news? >> well, i think what i've said is in may of '11 the crisis is over. what i can tell you now the door is closed on aig and the crisis, so what you're going to see going forward, the only big thing we're dealing with is ilfc. we're continuing to go through the approval process in the united states. we're going through the approval process in china. we think we're on track. we think we're in good shape. that should close in the second quarter. that's the last big non-core asset that has to close, but we're in the process of doing that. the rest of it, you'll see a company coming out of here, simplified, de-risked and knows where it's going. >> in terms of an investor standpoint, and i think this is a board decision, would a dividend being reinstated be a 2013 or a 2014 affair? >> we'll do it as soon as we

think it makes sense, and what's important right now is we're focusing our capital management on our debt. we've got to improve our coverage ratio and you do that in two ways. you reduce your interest expense by dealing with less debt and approving the earnings, so we're dealing with both of those. we want to make sure that the ratings agencies are comfortable. we're not moving too fast, and we want to make sure that we're comfortable, that we're focusing on the right things because we have to have good ratings to stand behind the promises that we make to our customers. >> everybody is talking about the interest expense reduction. that will continue to be a big focus. what about shared repurchase? >> i think when the time is right and we're comfortable. we have sufficient liquidity, and we have to demonstrate to ourselves the rate agencies and the regulators, that if another terrible crisis comes, we won't be dependant on governments to support us, and -- and until we're satisfied, not satisfied, we're going to continue with debt management which strengthens our company and at the right time we'll continue to

do share buybacks when it makes sense. >> in terms of ilfc, do you feel like you're in a spot to really command the highest price you can get? >> we think we've got the right price. i think we're probably leaving some on the table, and that's why we're pleased to take a percent ownership because maybe we'll earn some of that back overtime, but it's not an asset that makes sense for aig today. we shouldn't be in aircraft leasing. don't have the advantage on funding that we once had with the aaa, and it's just -- we've got to simplify this company. we've got to derie-risk it, and we've got to take $25 billion of debt off our balance sheet. very important. >> that's a huge piece of the story and obviously what investors are focused on. i thought it was interesting this, goldman sachs report. i think you probably saw it. >> i didn't see it. >> aig has replaced apple as the favorite pick among hedge funds, so you're seeing real activity in your stock. now i know you're not focused on

they ever day. you're running the business and focused on what you've just been discussing, but isn't it interesting that all of a sudden aig is top holding among hedge funds out there. what do you think about that? >> look, they are the first to take a look at what's coming. >> a comeback story. >> and they are looking at the future, and it's not necessarily in the story today. it's complicated, a little risky, and if you look at where we are today and the opportunity against our book value or as operational goals, we're well on target to achieve, we think those as operational goals, so as long as we keep growing our earnings, de-risking the company and cutting expenses and continuing to do appropriate capital management, i think this is a good story for several years to come. >> let me ask about the regulation, the company being designated a company that will hold more capital. how is this process coming that that's systemically important financial institution? >> we're waiting for word from washington. >> you haven't gotten word that

you are being looked at. >> we've been looked at but they haven't made a decision. we're running the company as if we we will be. working with the federal reserve as our regulator and as savings and loan holding company so we're there and going through the process with them, although it's a little more limited, but we're proceeding as if we'll continue to be regulated, either as a cffc or as we are today. we just have to adopt our earnings targets to having more capital but i don't think that's a problem at the end of the day. >> that requires more capital structure and more regulation? >> it means that they want you to have an extra layer of capital that says you're so big, we just want to make a little extra sure. >> is it too much, bob? we've heard from the jamie dimons of the world saying why are we holding all of this capital? >> mar crashing the fact is that the public is angry because we

made salaries and bonuses, and the public wound up having to have the government stand behind us during a difficult period of time. the regulators are absolutely committed to make sure no matter what happens in a dire circumstance, every financial institution can survive it without the aid of the government. >> and you've got to be ready. >> and they will be absolutely sure. why didn't you criticize them in the regulators will not be criticized the next time around. they will make sure there's enough money, and that's the way it will be. >> not just the ceos that made bad decisions with the 2008 collapse, the regulators being asleep at the wheel, i'm sorry. let's be honest here. >> i don't know if they were asleep at the wheel, but let's put it this way. a lot more tools in the tool kit to make sure they were wide awake. >> you're working to get this company back to be a simple insurance company, plain vanilla, easy to read. when do you feel that that vision materializes? how long does this process take? >> we'll never be plain vanilla.

>> exactly. >> good point. >> largest insurance company in the world, but we've got to make sure that we stay within the realm of insurance. to be in car leasing and aircraft leasing and some of the other business, doesn't make sense, financial products, definitely doesn't make sense so we want to be the world's most sophisticated and capable insurance company. the key is transparency and getting part of this non-core asset out, and i think you'll see that we'll an easier company towns. never be easy but easier. >> from what you say today in terms of the environment, u.s. as well as holdings elsewhere outside, the teal in china, et cetera, what does it say about the global economy? >> we see everything for our business. it's continuing to do okay. you know. we have a big operation in japan. we're still doing reasonably okay in japan. china's a great growth opportunity as you saw for us. looking at brazil and other countries like that, and the u.s. market also is a good market so, you know, don't count out the u.s., so we're here.

we've got to figure out some of the issues with product which we have. peter hancock has done an excellent job of bringing risk management into the u.s. marketplace so we're pretty comfortable we'll see growth around the world, and the economies so far have not really dramatically affected our business. >> bob benmosche, nice to have you on the program. >> thanks you. >> president and ceo of aing a. up next, bob pisani and up next a u.s. executive calls french executives lazy. how about that. this is real, folks. he's got up in a public battle with the french. stay with us. you won't want to miss that. ss? at fidelity, we do it by merging two tools into one. combining your customized charts with leading-edge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points. we like this idea so much that we've applied for a patent.

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but she's still going to give me a heart attack. we're more than 78,000 people looking out for more than 70 million americans. that's health in numbers. unitedhealthcare. welcome back. well, for a while there it looks like stocks could come all the way back today and end positive and that faded in the final few minutes. bob pisani with more now on today's movers and shakers. >> thanks, maria. the important thing about today is big, big volume, and it did not start out very well. take a look at the dow here. we had lousy numbers over in europe. the manufacturing numbers were terrible. china was down 3% so we were down all throughout the day until about 2:30. you see the move up. not a lot of news at 2:30, but i can tell you this. the volatility index, the fear index, the vix, collapsed. people decided to buy less protection that. created some buy programs in the market, so a lot of these etfs, the intraday traders play like the spiders and e-mini

contracts, moved to the upside. let's move along and take a look at apple. mr. einhorn talking about apple middle of the day, may have been an impetus for the market. starting moving up at 2:30, the same time the overall market moved up. hewlett-packard moving up going into the close. it's true, hewlett is a heavily shorted stock and true maybe some people were very optimistic. still, that's quite a move to the upside for hewlett. can you see it's trading up nicely, in fact, up about $1 in after-hours trading. >> thanks, bob. stan druckenmiller telling me sequestration is a joke when it comes to our budget problems, so why is the white house saying so many bad things will happen to americans if the spending cuts take effect. live to washington for the latest on that, and then harvard business school professor robert porter says reforming the tax code is a top priority. is anyone in washington listening? plus, thumbs down on paris. a u.s. executive blaming the french government for fueling laziness among french workers.

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. welcome back. the ceo of a u.s. based company is calling out french workers for being lazy and overpied. titan international ceo maurice taylor sent this letter to france's industry minister explaining why his company will not buy a troubled goodyear plant north of paris, and the letter is pretty blunt. he writes, quote, the french workforce gets paid high wages but works only three hours. they get one hour for breaks and lunch, talk for three and work for three. i told this to the french union workers to their faces. they told me that's the french way. he joins me right now on the telephone, maurice taylor. >> how are you doing, maria? >> so happy you're calling into the program. >> the union called you a lunatic after your letter was published in a french paper. are you upset the workers of france or the government for its policies? >> well, the first thing is i just tell it like it is, you know. this is not trying to be politically correct or a sweet

politician. this has been going on for four years. goodyear has been negotiating with this communist union, two factories side by side, and this one, they were closing the passenger car business, and they wanted to keep the farm business going and sell it, so they used morgan stanley, go try to find anybody, and we were the only ones, so we negotiated with goodyear, come to a deal with the buyer and then we went to the union, and the union has to approve. now, there was no cut in wages, there was nothing, except they wanted to have a multi--year guaranteed employment, guaranteed everything, and i said, okay, we'll do two years, and they said this is a sham. my question to them was you mean i would spend millions, tens of millions of dollars, and you think this is some sort of a sham to close the plant. you're all nuts. i met with them to their face, so that's the story.

>> that is. and the union says your view is based on visiting a factory troubled with scaled back operations. would it make a difference if the plant titan was considering buying was thriving, or is that not part of this? >> the first thing is, maria, have a factory in france, had it there for years and the workers do a great job. this factory what i said was true, and they admitted it. they laughed about it, and that's where this union president, this mikeal, i call him spike because he's got his hair all up in a deal, and they are devout commies and they said that's the french way. you have to do the french way, and i said, well, i'm not doing it if it's going to lose money and that's what you're always going to do. >> what do you do? you just want to avoid france then in the french industry minister called your comments as extremist as they are insulting. i mean, they said titan could learn from the french, learn from the tire-maker micheline.

are you going to learn something from micheline? >> well, the first thing is micheline has closed factories. micheline is makeing investment every place but france, but the minister, his staff must have wrote that for him, okay, and they didn't do a good job and if you got a cuppy of the letter i sent him back, i told him, you know, we're number one in the world. i probably forget that micheline used to make the steel wheels, too, and they are out of that. guess who owns the wheel business that micheline had? we do. so it -- it's kind of goofy, and then he listed all these companies, massie ferguson. they went bankrupt. the whole point is the minister was trying to use us as a billy club figuring that most ceos will not say anything. they just keep quiet, but, you

know, he picked the wrong guy, and i'm going to tell him what it is. the french people deserve to know. and you should understand that this goodyear plant, goodyear was trying to save almost 500 jobs, and these are the highest paid industrial jobs in france, so they are nuts. >> real quick, maurice. you said america is going down this road. what did you mean? >> well, i think the same thing. it's -- it's no different than when you seen gm and you seen chrysler go bankrupt. well, the joke is you have a monopoly with the united autoworkers so it's only a matter of time and they are going to be back in the same boat. why wouldn't you have the uaw at ford, the steel workers at general motors and put chrysler with the teamsters?

now you've got -- they are going to think of their own. they are not going to be, you know, squeezing and the hell with everybody else. >> right. it makes sense. maurice, good you have to on the program. thanks so much for calling in. really appreciate it. we'll keep following your story. >> thank you. >> maurice taylor joining us. new developments in the herbalife story. now to scott wapner. >> reporter: cnbc has learned one of the future of herbalife's biggest distributors is in question and could lead to the individual cutting ties with the company completely. on february 14th herbalife de-listed or severed ties with a vendor responsible for the sale of business leads and sales tools to distributors. cnbc has learned that the salesmen in question has had a relationship with the de-listed vendor. herbalife said it tightened its rules regarding sales generation leads. that's the way certain distributors, especially the very larkest ones, look for business on the internet. the changes were apparently made by the company to be more

transparent and to deal with the long-standing controversy over how sales leads are made. we've also learned that the individual in question is a top tier salesman, a so-called chairman's club meng member of which herbalife has 49. all of this has been described by one person familiar with the company's business as a serious development. this does follow the depart you're another top sales person who left after refusing to comply with the new rules or at least tightened rules. herbalife is downplaying the story telling me that the overall business that could be impacted if the salesman was to leave is less than 1%. company's overall ref knew. nonetheless, maria, an interesting development in this ongoing story. >> certainly is. scott, thank you so much. we'll keep following that. the latest development on avoiding automatic spending cuts next. i'll speak with harvard business school professor scoabout the

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welcome back. the deadline for automatic spending cuts in s next week. the doom and gloom rhetoric is getting worse. let's get to john harwood with the angle today from washington. >> reporter: maria, wanted to brick our viewers on to what that deadline means. it won't be an automatic spe

spending mechanism. the cuts can be administered at the discretion of some government managers and wouldn't have dramatic effects immediately and are not likely to trigger massive immediate public outrage. it's more important to look at march 27th deadline. when government funding for the entire government will run out. you could have a government shutdown if democrats and republicans can't agree. by then you're going to have mounting impacts of those sequester cuts that don't become so obvious immediately, perhaps longer lines at airports, and you're going to have public unhappiness over the prospect of another month of bickering between democrats and republicans so next week is not as important as the end of march. we'll see if that in fact can produce a long term budget agreement between the two parties. right now it's not looking great. >> thank you, john. >> earlier in the program i spoke with famed former hedge fund manager stan druckenmiller and what he had to say about the spending cuts known as

sequestration. >> the hype over sequestration is a joke. sequestration is 85 billion. if you net out sandy you're talking about a quarter of 1% of gdp. >> joining me right now is harvard university professor michael porter. professor porter heads up harvard's institute strategy for competitiveness. >> nice to see you. >> nice to be here. >> do you agree with druckenmiller it's only 85 billion and the worst of the story is what's to come later. >> doesn't really matter for our federal budget. desperately need a budget comp nice and desperately need a sustainable budget that can reduce the uncertainty about this issue. the real budget problem is around the entitlement programs which is not part of the sequestration process. that's the budget buster. it's less health care spending. unless we're doing something that will change the direction of health care spending, it all doesn't matter. >> why are we having such a hard time? i mean, is the u.s. too hobbled

by politics to be competitive anymore? why are we having such a hard time cutting entitlements, agreeing on this, if everybody agrees that's what needs to be cut. >> maria, i think we're at a moment in u.s. that we haven't seen in many, many decades. we've had 50 or 60 years where the pie has been rising. incomes have been rising. opportunity has been there. mobility has existed, and starting about a decade ago we started to see fundamental changes in those trends. we started to see the job generation machine of the u.s. economy sputter. we started to be unable to create jobs in areas where we had to compete. our income stagnated. our workforce participation fell. that means less americans are working than ever before. mobility has been declining. the ability of people to move up and achieve middle class, and all that's because of really fundamentally the globalization of competition, the fact that we're no longer an isolate the

economy. being an american doesn't mean that you're guaranteed a high wage. you have to be productive, and we have to create a very low-cost efficient place to do birks and we've let all that slip in america. >> how has that slipped? is it because of the debt that's strangling us? why are these things, you know, slipping? >> the debt and the budget imbalance is really a symptom that we've had sort of anemic economic growth. we haven't had rising incomes. we haven't really been improving the fundamental performance of the economy. and therefore we've had less tax revenue. we've made all kinds of promises to deal with stagnant incomes, promised we'll pay for health care and promised to pay for retirement and promised we'll help people with housing. made all these promises our economy can't afford because the economy isn't performing. this has been going on for the last decade or two. the 2007 recession really

brought it to life, but -- but what's happened is america used to be a uniquely productive, low-cost place to do business. we had efficient infrastructure. we had limited regulation. we believed in, you know, we believed in the market. we had -- >> market capitalism. >> market capitalism. bit by bit we've allowed regulatory costs to go up. our legal system is very expensive and cumbersome. our infrastructure is eroding, and we've fallen behind on skills. it used to be that america was the place where we have the high skills and now, of course, so many of our citizens don't have the skill to actually earn a decent income. >> we don't have the skill sets required to actually fill the jobs that are needed right now. >> to fill the jobs that are needed, and so this great middle class that has been the bedrock of america, it's hollowing out because now you really need advanced skills in order to compete and we have -- we've lost our ability to, you know,

kind of bring those people from high school to a good wage and to a middle class income. >> how do we get back to that? what are the three things washington needs to do right now to boost our competitive, to get us back on a growth trend? >> i would say, number one, probably, we need to sort out our corporate tax system. we have the highest corporate tax rate in the world. we're losing lots of investment in the u.s. because we have -- we have that high corporate tax rate and yet we have the loopholes and deductions that are reducing the amount of income we're generating from corporate taxes. i think everybody agrees on both sides, corporate tax reform. number two, we've got to get a sustainable budget compromiscom. everybody is waiting for what's going to happen. >> cliff to cliff. >> cliff to cliff. and business investment and business commitment, particularly to the u.s., has been -- and the third thing, i'd say, we've got to take advantage

of the great wind fall, the great positive wind fall we've discovered, and that is the energy situation. we have an opportunity to eliminate our dependent on foreign energy. bring back -- we have hundreds of billions of dollars of trade deficit now on energy, we can change all that. we have bridge to a cleaner world with natural gas, which is 50% cleaner than oil. >> all i heard in davos, the whole week, was about shale. and we've done a lot about shale on this program. we've got shale rich in this country. >> right. >> so, that's about fracking. what about keystone? >> we should be doing that, too. we'd much rather buy our energy from canada than deal with all the complexities that we've been stuck in for the last 20 years with foreign oil. so, we -- technology has given us this wonderful opportunity to have low energy cost. we have to seize that, rather than keep debating and discussing and fighting over it. we've got to get this budget compromise done. >> right. everybody, whether you're an

individual institution, government, needs a budget. >> yeah, absolutely. >> we haven't had one. michael, great to have you on the program. michael porter, based at harvard business school. we'll have more on hewlett-packard when we come back. stay with us. changed you got to bring it in. if your tires need to be rotated, you have to get that done as well. jackie, tell me why somebody should bring they're car here to the ford dealership for service instead of any one of those other places out there. they are going to take care of my car because this is where it came from. price is right no problem, they make you feel like you're a family. get a synthetic blend oil change, tire rotation and much more, $29.95 after $10.00 rebate. if you take care of your car your car will take care of you. tdd# 1-800-345-2550 when the spx crossed above its 50-day moving average, tdd# 1-800-345-2550 i saw the trend. tdd# 1-800-345-2550 it looked really strong. tdd# 1-800-345-2550 and i jumped right on it. tdd# 1-800-345-2550 tdd# 1-800-345-2550 since i've switched to charles schwab... tdd# 1-800-345-2550 ...i've been finding opportunities like this

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welcome back. we want to look at the movers and shakers. hewlett-packard shares spiking. let's go to josh lipton. >> hey, maria. we were talking about how hp started rallying there in the close ahead of its earnings report. we saw that pop on strong volume in the options pits. jon najarian pointed out, we had significant acceleration of call buying and put selling. heavy bullishness. then hp reported and now that stock is ripping higher in the afterhours. up some 6.5%. now, maybe people made a smart bet. maybe they knew something they shouldn't. cnbc has called the s.e.c.'s attention to the action. maria, we'll keep up posted. >> thank you so much, josh. up next, a dire warning about america's fiscal future from somebody we should all listen to. back in a moment. what's next?

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